There have been exaggerated projections about the impact of 2010 on South Africa’s tourism industry, including one assertion that “millions” of new jobs will be created and another that the obligation of playing host will galvanise the government into finally controlling the country’s crime rate.
Overexcited claims aside, there are considerable economic benefits in prospect; most obviously, the expenditure of several billion rands on building and upgrading stadiums, airports and perhaps, as is being suggested, the fast-tracking of the Gautrain project.
There will, no doubt, be a huge influx of tourists, participants and hangers-on — an estimated 235 000 visitors — for the event proper. And the international marketing spin-offs will be greater. The World Cup will bring South Africa into the homes and on to the TV screens of many millions worldwide — including those who have never seriously considered visiting South Africa before. Barcelona, as an example, still experiences abnormally high demand as a venue for international conventions, more than a decade after its Olympics in 1992.
To these “hard” economic payoffs may be added a variety of intangible benefits including the huge fillip to national pride, which comes from hosting a popular, high-profile international tournament of this size and calibre.
But there are two potential pitfalls for the tourism sector. The first goes to the issue of building new hotels. Huge though it is, the World Cup tournament is nevertheless only a single event, one that will endure for a month or so in 2010. Hotels on the other hand, are 365-days-a-year businesses and long-term investments that take years — usually many years — to generate a return on capital.
It’s highly spurious, therefore, to motivate a new hotel development solely or mainly on the strength of the 2010 World Cup, which some South African developers will most likely attempt to do. They will be flirting with bankruptcy.
As always, the decision to build a new hotel or other tourist accommodation — implying as it does, an investment of many millions of rands — should be motivated by clearly identifiable and sustainable demand.
The second pitfall can be likened to a Greek tragedy, the potential for unrealistic overpricing of the type that characterised the Hellenic hotel industry’s build-up to the Olympics.
The final accounting is yet to be done. But indications are that what should have been the country’s best-ever year for tourism and the hotel sector, is turning out to be one of its worst.
On the eve of the Olympics, analysts in that country were actually predicting that tourism would decline by 8% from last year (not a great year anyway), owing to what the national tourism office referred to as “irrational” price hikes.
In greedy anticipation of the games, hotels and other facilities in and around Athens cranked up their rates to unprecedented levels, and the country’s image as an expensive holiday destination, tragically, drove tourists away.
South African operators also engaged in this practice when we hosted the Rugby World Cup in 1995. The steep prices and threatened shortage of hotel accommodation turned away potential guests and many hotel rooms remained empty during the matches. Air carriers and hoteliers claimed to have lost millions of rands in revenue as a consequence. Car-hire firms had similar laments, with some describing the event as a “total damp squib”.
The lesson is clear. The hospitality sector will shoot itself in the foot if it repeats the practice by creating mythical shortages or irrationally pricing its services. Will we be stupid twice?